The Myth of the Geographical Recession

The Myth of the Geographical Recession

The Myth of the Geographical Recession

Probably the central misperception about the Great Recession is the idea that it basically consists of wide-spread job losses among construction workers spurred by massive overbuilding. This misperception, combined with the fact that the unemployment rate is very low in a handful of states with barely any residents, has led a lot of people to vastly overrate the geographical basis of the recession. Since really out-of-control homebuilding was confined to a few places—Las Vegas, Phoenix, Florida, and the Inland Empire in California—you get people worrying that broad-based stimulus doesn't really do what we need to do. But look at this data I poached from Paul Krugman and reworked into a bar chart and you'll see that a majority of the population is living in places where the unemployment rate is over 8 percent and much less than 10 percent of the population lives in places where the unemployment rate is less than 6 percent.

That's all just to say that there's a lot of good broadly demand-stimulating measures could do. It's also true that the United States is a great big country with over 300 million residents and even optimal demand-side policy would still leave plenty of people facing plenty of problems. But there's a very big and very broad problem of mass unemployment out there that isn't limited to a handful of hard-hit locations.